Report on the Outline of the Tenth Five-Year Plan for National Economic and Social Development (2001)

(Delivered at the Fourth Session of the Ninth National People's Congress on March 5, 2001)

Zhu Rongji

Premier of the State Council

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Notes:

1. News dispatches are embargoed until the conclusion of today's meeting.

2. The official version of this speech in Chinese will be released by the Xinhua News Agency.

Fellow Deputies,

Beginning this year, China will implement the first five-year plan for the new century. The Proposal of the CPC Central Committee for the Formulation of the Tenth Five-Year Plan for National Economic and Social Development was adopted at the Fifth Plenary Session of the Fifteenth CPC Central Committee. The Proposal defined objectives, guiding principles and major tasks for China's national economic and social development during the next five years. In the spirit of the Proposal and on the basis of opinions solicited from all sectors of society, the State Council has drawn up the Outline of the Tenth Five-Year Plan for National Economic and Social Development (Draft) of the People's Republic of China. On behalf of the State Council, I now make my report to you and present the Outline (Draft) for your consideration and also for comments from members of the National Committee of the Chinese People's Political Consultative Conference.

I. Review of National Economic and Social Development During the Ninth Five-Year Plan Period

Over the past five years, the people of all ethnic groups worked hard together, blazed new trails with a pioneering spirit, and obtained great achievements in all fields of endeavor under the leadership of the Communist Party of China.

The national economy experienced sustained, rapid and sound development, and overall national strength continued to grow.In the five years, China's GDP increased by an average annual rate of 8.3% and reached 8.9404 trillion yuan in 2000. The mission of quadrupling the per capita GNP of 1980 has been overfulfilled. As the economy continued to grow and economic performance improved, national revenue in 2000 reached 1.338 trillion yuan, an average increase of 16.5% annually. The output of major industrial and agricultural products now stands in the front ranks of the world's economies, and commodity shortages were by and large eliminated. Progress was made in industrial restructuring. The quantities of grain and other major agricultural products we are capable of producing increased noticeably, marking a historic change from a long-term shortage of agricultural products to a basic balance in their total supply and demand, with even a surplus during good harvest years. Good results were achieved in eliminating outmoded industrial production capacity, reducing excess production capacity and upgrading technology in key enterprises. Information technology and other new and high-tech industries grew rapidly. Marked success was achieved in infrastructure development, alleviating bottlenecks in energy, transportation, communication, and raw and processed materials.

Economic restructuring was extensively carried forward, and a socialist market economy was preliminarily established.Significant advances were made in the establishment of a modern corporate structure in large and medium-sized state-owned enterprises. Most key state enterprises became corporations, and a considerable number of them were listed on stock markets inside or outside China. There was a marked reduction of losses and increase of profits in enterprises, and total profits from state-owned industrial enterprises and from the industrial enterprises with a controlling share held by the state reached 239.2 billion yuan in 2000, an increase of 190% over the 1997 figure. The objectives of reforming large and medium-sized state-owned enterprises and turning around loss-generating operations within three years were basically attained. At the same time that public sectors of the economy further developed, private and individual sectors also grew rapidly. The market system continued to improve, and the supply of capital, technology and labor expanded rapidly. The basic role of the market in the allocation of resources was noticeably enhanced. The system of finance and taxation continued to improve. Banking reform was accelerated. Major progress was made in the reform of the urban housing system, the social security system and government institutions. The state macro-regulation system was further strengthened.

We opened wider to the outside world, and the pattern of all-round opening took basic shape.Reform of the foreign trade system steadily progressed, and the internationally-oriented economy grew rapidly. The total volume of China's imports and exports reached US$474.3 billion in 2000, with exports accounting for US$249.2 billion, a rise of 69% and 67% respectively over the 1995 figures. The mix of exports improved, and the proportion of electromechanical products and high-tech products increased. The spheres of activity open to foreign businesses were gradually widened, and the investment environment was improved. Foreign investment was increased and better utilized. More than US$289.4 billion in foreign funds were put to use during the past five years, an increase of 79.6% over the period of the Eighth Five-Year Plan. China's foreign exchange reserves totaled US$165.6 billion at the end of 2000, US$92 billion more than in 1995.

People's living standards continued to improve, and generally people began to lead a relatively comfortable life.In 2000 the per capita net income of rural dwellers and the per capita disposable income of urban residents reached 2,253 yuan and 6,280 yuan respectively, increasing by 4.7% and 5.7% annually in real terms. There was abundant supply of commodities; the level of consumption continued to rise, and the total volume of retail sales of consumer goods increased by an average annual rate of 10.6%. Housing, telecommunications, electricity and other aspects of living conditions for both urban and rural residents improved considerably. Personal savings deposits of residents increased by more than 100% over the past five years. The value of stocks, bonds and other financial assets increased rapidly. The number of people below the poverty line in rural areas decreased drastically. The objectives set in the seven-year plan to help 80 million people get out of poverty were basically attained.

The development of science, technology and education was accelerated, and other social undertakings progressed in a comprehensive way.The March 1986 Program to stimulate the development of high technologies was implemented successfully. A number of major results were achieved in the fields of aeronautics and astronautics, information technology, materials science, bioengineering and other high technologies. New advances were made in basic and applied research. The transformation of applied research institutes under government departments into enterprises has been basically accomplished, and restructuring of other research institutes has been carried out in a comprehensive way. The process of getting scientific and technological achievements to the market and applying them in production was accelerated. Progress was made in strengthening various types of education at all levels. Initial success was achieved in fulfilling the objectives of making nine-year compulsory education basically universal in the country and eliminating illiteracy among young and middle-aged people. Major progress was made in the reform of the management system of higher education. The increase of university and college enrollment was widely appreciated by the general public. New advances were made in population management and family planning. Great efforts were made in ecological conservation and environmental protection. Culture, public health, sports and other social undertakings continued to develop. Successive results were achieved in building a clean and honest government and in the struggle against corruption. The administration of all facets of public security was improved. New progress was made in improving socialist spiritual civilization, democracy and the legal system. Continuing progress was made in modernizing national defense and the armed services.

During the Ninth Five-Year Plan period, the Chinese government resumed its exercise of sovereignty over Hong Kong and Macao, and historic progress was made in the great cause of peaceful reunification of the motherland. Since the return of Hong Kong and Macao to the embrace of the motherland, the principle of "one country, two systems" and the basic laws of the two regions have been implemented in a comprehensive way. Outstanding achievements were made in the work of the governments of the special administrative regions. Social stability and economic development were secured in Hong Kong and Macao.

With the fulfillment of the Ninth Five-Year Plan, we attained the strategic objectives for the second stage of China's modernization drive, which laid a solid foundation for undertaking the Tenth Five-Year Plan and moving on to the third stage. This constituted a great achievement in China's socialist modernization drive and a new milestone in the progress of the Chinese nation.

These tremendous achievements in economic and social development during the Ninth Five-Year Plan period were hard-won victories over numerous difficulties. We successfully coped with the challenges posed by unexpected international events. We protected ourselves from the impact of the Asian financial crisis. We controlled inflation during the initial stage of the Ninth Five-Year Plan and curbed deflation in the middle and late stages. We also conquered severe floods and droughts. We attained these achievements thanks to the timely and correct policy decisions made by the CPC Central Committee with Comrade Jiang Zemin at its core in the face of numerous problems and difficulties and to the concerted efforts of the people throughout the country. On behalf of the State Council, I would now like to pay my highest respects to the people of all ethnic groups. You have all been working hard and making contributions in your own fields of endeavor. I also wish to express our sincere thanks to our compatriots in Hong Kong Special Administrative Region, Macao Special Administrative Region, Taiwan, as well as to overseas Chinese who have shown their concern and support for the development and reunification of the country.

During the implementation of the Ninth Five-Year Plan, we have accumulated a wealth of experience in improving macro-economic management and regulation to meet the requirements for developing a socialist market economy.

First, we have solved problems blocking our advance by stimulating economic development.Development is the fundamental principle. In the face of various social problems, we have always made economic development the central task and adopted effective measures to promote a sustained, rapid and sound development of the national economy, thus providing a foundation for handling other problems properly. Meanwhile, we adhered to the principle of "doing two jobs at once and attaching equal importance to each". We increased our efforts to improve socialist spiritual civilization, democracy and the legal system, and this has created a good political and social environment and provided a strong impetus for economic development.

Second, we made timely adjustments to the macro-control policy in accordance with the changing economic situation.In dealing with inflation, we paid attention to ensuring sustained expansion of the economy and a successful "soft-landing". In curbing deflation, we adhered to the principle of boosting domestic demand, resolutely enforced a proactive fiscal policy, and improved various policies and measures in the course of experience. We issued additional national bonds and expanded investment on the one hand, and we appropriately increased the income of the medium- and low-income urban residents and encouraged more consumption on the other, thus stimulating economic growth. We also adopted such measures as raising the export tax rebate rate and cracking down on smuggling in order to expand exports, achieve a balance of international payments, and keep the value of RMB stable. We implemented prudent monetary policies, adjusted interest rates and adopted many other measures to support economic growth. At the same time, we regulated the monetary supply, guided the direction of credit, and guarded against and reduced financial risks.

Third, we integrated the expansion of domestic demand with economic restructuring.In view of the over-productivity in the general processing industries, investments from national bonds were mainly put into infrastructure development. Investment in agriculture, science, technology and education was also increased, and support was rendered for technological upgrading in enterprises. We made use of the surplus production capacity in the capital goods industry to accomplish some large undertakings we had been wanting to but were unable to do for years. By so doing, we stimulated economic growth and increased the stamina for further economic development.

Fourth, we balanced reform, development and stability.Under complicated and difficult conditions, instead of coming to a halt, reform pressed forward vigorously and in an orderly manner, giving a powerful impetus to economic development. In the meantime, attention was paid to adjusting the magnitude of reform to the tolerance of the people. When economic restructuring and deepening reform unavoidably touched deep-seated interests, great attention was paid and various policies and measures were adopted to safeguard the fundamental interests of the general public. Vigorous efforts were made to implement re-employment projects and ensure that laid-off workers receive their basic living expenses and retirees their old-age pension payment on time and in full. The farmers' surplus grains were purchased without restriction at a protective price. All these measures helped to safeguard social stability and achieve sustained economic growth.

While fully affirming our achievements, we are clearly aware that there are still numerous problems in our economic and social life. The principal problems are as follows: inappropriate industrial structure and non-coordinated development of local economies; low overall quality of the national economy and low competitiveness in the international market; imperfections in the socialist market economy and conspicuous systematic factors hampering the development of productive forces; a comparatively backward state of science, technology and education, and relatively weak innovative ability in science and technology; a shortage of important resources such as water and petroleum and the deterioration of the ecological environment in some regions; growing employment pressure, slow income increase of farmers and some urban residents, and an increasing income gap; considerable disorder in some areas of the market economy; frequent occurrences of grave accidents; serious corruption, extravagance and waste, formalism and bureaucratism; and poor public order in some localities. The causes for these problems are rather complicated, but they are not unrelated to shortcomings and errors in our work. We must pay great attention to them and take further steps to solve them.

II. The Objectives and Guiding Principles of the Tenth Five-Year Plan

Looking ahead at the situation at home and abroad at the beginning of the 21st century, it can be said that the next five to ten years will be an extremely important period for China's economic and social development. The worldwide new scientific and technological revolution is progressing rapidly with great momentum. The economic globalization trend is gaining strength. Many countries are actively restructuring their industries, and our neighboring countries are accelerating their development. This international environment presents a severe challenge and a historic opportunity for us to strive to catch up and achieve development by leaps and bounds. At home, we are at a crucial juncture in economic restructuring, and reform is in a very difficult period. Our entry into the World Trade Organization will bring us a number of new problems. We are facing many arduous tasks. Many deep-seated problems need to be solved. All this requires us to seize the opportunity and accelerate development. At the same time, there are many favorable conditions for our national economy to achieve rather rapid development over a fairly long period.

In light of the situation and tasks facing us during the Tenth Five-Year Plan period, the Outline sets forth the main targets for economic and social development in the next five years as follows: maintain a fairly rapid growth rate in the national economy, achieve noticeable success in the strategic restructuring of the economy, and make marked improvement in the quality and benefits of economic growth to lay a solid foundation for doubling the 2000 GDP by 2010; make significant progress in establishing a modern corporate structure in state-owned enterprises, increase the soundness of the social security system, improve the socialist market economy, and open wider to the outside world and strengthen cooperation with other countries; expand avenues of employment, increase the income of urban and rural residents steadily, improve people's material and cultural standards of living, and improve ecological conservation and environmental protection; accelerate the development of science, technology and education, further improve the quality of the Chinese people, and achieve marked progress in improving spiritual civilization, democracy and the legal system.

The Outline of the Tenth Five-Year Plan embodies the following major guiding principles.

Making Development the Central Theme.We stress a balance between high growth rate and good economic returns and attaining fairly rapid growth by improving economic returns. Sound economic growth must be based on strong market demand and good economic returns. This is a fundamental principle. Based on an overall analysis of conditions in all sectors of the economy, we have set the target for the average annual economic growth rate in the Tenth Five-Year Plan period at around 7%. Though slightly lower than the actual growth rate of the Ninth Five-Year Plan period, it is still fairly high. Arduous efforts have to be made to attain this target through better economic performance. However, as there exist some uncertainties both at home and abroad, we have to leave some leeway when defining our target. This will help people focus on restructuring and improving economic returns, and also help prevent overheating of the economy and redundant development.

Concentrating on economic restructuring.We have already reached the point where we cannot further develop the economy without making structural adjustments. Under the old economic structure and its crude manner of growth, products will not be marketable, and it will be impossible to sustain resources and preserve the environment. We must adjust the economic structure in developing the economy and maintain a relatively rapid growth in structural adjustments. In the next five years, efforts should be intensified to adjust the patterns of economic development between different industries, between different regions, and between urban and rural areas, with emphasis on the industrial structure. We should stabilize and strengthen agriculture as the foundation of the economy, accelerate industrial reform, reorganization, upgrading and optimization, vigorously develop the service industry, accelerate efforts to base the national economy and society on information, and continue to reinforce the infrastructure.

Making reform and opening up and technological progress the driving force.The success of both economic development and structural adjustment depends on institutional, scientific and technological innovation. In the next five years, we must unswervingly pursue reform, open China wider to the outside world, and break down the institutional obstacles to the development of productive forces. This will provide a strong impetus for economic and social development. In addition, we have to give priority to the development of science, technology and education, further implement the strategy of developing China through science and education, invigorate science and technology, train more skilled personnel, and better integrate science, technology and education with the economy.

Making improvement of the people's living standards the basic starting point.Raising the people's living standards in both urban and rural areas is the basic goal of our economic development and a crucial factor for expanding domestic demand and stimulating sustained economic growth. We must give priority to raising the people's living standards. To accomplish this we must create more jobs, increase personal income, distribute income more equitably, improve the social security system, and ensure a more comfortable life for the people.

Coordinating economic development with social development.We should make great efforts to improve socialist spiritual civilization, democracy and the legal system, balance reform, development and stability, accelerate development of various social undertakings, and ensure social stability. We need to pay close attention to and solve issues of population, resources and the ecological environment, take further steps to implement the strategy of sustainable development, and stimulate coordinated economic, social and environmental development.

The Outline for the Tenth Five-Year Plan emphasizes its strategic, macro-economic and policy characteristics. It contains fewer specific targets and sets more tentative ones adjustable to structural changes. The Outline focuses on key development areas and the settlement of major problems, orients our efforts, and presents corresponding policies and measures. It stresses that the role of market mechanisms should be fully exercised in the implementation of the Plan, and that economic levers, economic policy and legislation be further employed in the government's macro-control. In the process of formulating the Plan, we need to encourage more participation by all elements of society, thus making it a process of giving full scope to democracy, absorbing all useful ideas, and reaching agreement among all sides.

III. Strengthening Agriculture as the Foundation of the Economy and Striving to Increase Farmers' Income

Agriculture, rural areas and farmers are of great importance to the reform, opening up and modernization drive. During the period of the Tenth Five-Year Plan, we need to give top priority to implementing the Party's basic rural policy, strengthening agriculture as the foundation of the economy and increasing farmers' income. We must focus on the following aspects of this work:

Accelerating restructuring of agricultural production and the development of the rural economy.This is the fundamental way to improve economic returns in agriculture and increase farmers' income. While effectively protecting the cultivated land and stabilizing our grain production capacities, we need to restructure the patterns of farming, focusing on improving strains, quality and economic returns. We need to accelerate the development of animal husbandry, forestry and aquaculture. We need to adjust the patterns of agricultural production appropriately in different regions, taking into account their local comparative advantages. Agricultural production needs to be developed in light of local characteristics, and scale of economy and specialization need to be developed to raise the proportion of production marketed. Great efforts need to be exerted to promote the industrial management of agricultural production, to support leading enterprises, and to spread the practice of farmers working with companies or producing crops on a contract basis. We need to develop industries for processing, storing and transporting agricultural products and keeping them fresh in order to gain better returns from intensive processing of agricultural products. Town and township enterprises need guidance in restructuring, technological progress and institutional innovations. Small towns and cities need to be expanded; their economies need to be made prosperous; and steady progress needs to be made in urbanization in order to increase job opportunities and sources of income for farmers. We need to work diligently to reinvigorate agriculture through science and education. We need to strengthen the research, development and application of biotechnology, information technology and other high and new technologies, and spread the use of improved strains and advanced technologies. Great efforts need to be made to stimulate the industrialization of agriculture by applying agricultural science and technology. We need to improve the socialized service system for agriculture. Market information systems for agricultural products need to be established and standards and inspection procedures need to be formulated to ensure food safety and quality. In restructuring agriculture, we need to proceed in light of local conditions and follow the principles governing the development of the market, and we need to protect farmers' right to independence in production and operation and refrain from pressure and coercion.

Actively promoting the reforms in rural areas.While keeping the system of stable, long-term land contracts as a foundation, areas where conditions permit should be encouraged to explore a land operation rights transfer system. In light of the new situation in grain production and distribution, we need to continue to deepen the reform of the grain distribution system. While increasing the central grain reserves appropriately, the main grain-consuming areas should accelerate the pace of market-oriented grain distribution, and their need for grain should be met by establishing long-term and stable purchase and sale relations with the main grain-producing areas and by renewing and regulating the central grain reserves. The relevant departments in the main grain-producing areas should continue to adhere to the three policies of purchasing surplus grain from farmers without limit at protective prices, of having state-owned grain purchase and wholesale businesses sell grain at a profit, and of ensuring closed operation of grain purchase funds and the reform of state-owned grain purchase and wholesale businesses. These departments need to purchase surplus grain from farmers without limit at protective prices, and they will continue to receive funds from the central treasury to make full use of their superiority in grain production. This will expand the grain market for the main grain-producing areas and promote a reasonable rise in grain prices. This will also be conducive to adjusting the agricultural structure in the main grain-consuming areas and broadly increasing farmers' incomes. Basic farmland should be protected, and conversion of cultivated land to non-agricultural land without authorization will never be allowed. This is where we draw the line. The system of administrative fees and taxes in rural areas needs to be reformed by abolishing all administrative fees imposed exclusively on farmers, such as contributions to township and village public accumulation funds and at the same time by raising the current rates of agricultural tax and special agricultural product tax where it is appropriate. This is a sound policy for safeguarding the legitimate rights and interests of farmers and reducing their burden. Reform needs to be accelerated with a review of the experience gained from pilot projects in Anhui Province. As a result of the reform of taxes and administrative fees, it will be necessary to decrease the number of the administrative bodies and employees in towns and townships, and reduce the number of village and group functionaries receiving government subsidies. It will be necessary to dissolve or merge some townships and towns where conditions permit. We need to continue to deepen the financial reform in rural areas and actively seek a financial system that helps stimulate rural economic development. It is necessary to accelerate the reform of the management system for rural credit cooperatives in light of local conditions. It is of particular importance to clearly establish ownership, exercising better control over rural credit cooperatives by bringing them within the legal person framework, and hold individuals responsible for preventing and defusing financial risks. Adhering to their mission of serving agriculture, rural areas and farmers, rural credit cooperatives must strengthen their operation and management, and expand their roles as the dominant financial force in rural areas and as the financial link between farmers. The Agricultural Bank of China and other financial institutions should also give more support to agriculture and the rural economy. The reform of rural supply and marketing cooperatives should be deepened.

Stepping up the construction of agricultural and rural infrastructure.More investments need to be made to accelerate the harnessing of big rivers and lakes. No time can be lost in constructing pivotal projects on major rivers and reinforcing decaying reservoirs to improve their flood-control, flow-management and storage capabilities. Great efforts need to be made to upgrade the water conservancy projects in large irrigated areas, and farmers need to be encouraged to play a more active role in building irrigation and water conservancy projects. We should do a good job in water and soil conservation. Efforts to build national commodity grain bases and quality agricultural product bases need to be intensified to stimulate comprehensive agricultural development. We need to continue to increase the construction of power grids, telecommunications, radio and television installations, roads and water supply facilities in rural areas to improve the production, living and marketing conditions there.

Continuing to fight poverty in rural areas.Although the seven-year plan to help 80 million people out of poverty has been basically fulfilled, it will be an arduous task for a long time to bring about a fundamental change for the better in poverty-stricken areas. We need to intensify our efforts to fight poverty and priority needs to be given in our anti-poverty endeavor to ethnic minority areas in central and western China, the old revolutionary base areas, border areas and destitute areas. Assistance to the poor needs to continue to be development-oriented. More funds need to be put into anti-poverty efforts in every possible way. We need to expand the scale of programs that provide jobs as a form of relief and support efforts in poverty-stricken areas to improve the infrastructure.

IV. Energetically Optimizing and Improving Industrial Structure

Readjusting and improving industrial structure is the key to the strategic restructuring of the economy. We must stress the following aspects.

Enhancing traditional industries with high, new and advanced technologies.We need to pay close attention to the restructuring and reform of traditional industries. In these industries enterprises are the main entities, and they should be directed by the market and supported by technological advances. The following measures should be taken. First, we need to increase product variety, improve product quality, save on energy, reduce waste, prevent and control pollution, and increase productivity. These measures are most important in the energy, metallurgy, chemical, machinery, automobile, building materials, construction, textile and light industries. Support should be given to a number of key enterprises for technological renovation to improve their technology and equipment. Second, we need to speed up development of universal, key and accessory technology that can stimulate structural advancement by depending on both domestic innovation and imported technology. We need to stimulate equipment manufacturing and design and build complete plants of large, advanced and highly-efficient equipment urgently needed in China. Third, in major industries, we need to encourage the establishment of a number of large companies and enterprise groups through stock listing, merging, association and reorganization. Such companies and groups need to have their own intellectual property rights, core products and a strong central leadership, and they should become key players and pillars in industrial readjustment and advancement. Fourth, we need to support and promote renovation of old industrial bases, fully utilizing their strong foundation and concentration of talent to raise their production levels. The cities and large mining areas which depend on the exploitation of mineral resources should develop other industries to substitute for mining in light of local condition. At the same time, we need to take economic, legal and necessary administrative measures to continue closing down plants and mines that produce shoddy goods, waste resources, cause serious pollution, or operate under unsafe conditions. Outmoded and surplus production capacity needs to be abandoned or reduced. Relocation and reconstruction of these outmoded facilities will be prohibited. Enterprises that have been in the red for long with little hope of recovery and whose debts surpass assets should be allowed to go bankrupt, and mines with exhausted resources should be closed. We should take the initiative to facilitate and gradually standardize the channels for encouraging such enterprises to quit the market.

Developing new and high-tech industries, and using information technology to stimulate industrialization.In accordance with actual situations, we need to selectively stimulate development of new and high-tech industries such as information technology, bioengineering and materials science. We need to lend support to important high-tech projects, such as high-speed, wide-band information networks, key integrated circuits and new-type carrier rockets in order to strengthen China's new and high-tech industries on an overall as well as individual basis. We need to expand the manufacturing of information technology products, develop the ability to manufacture all components of integrated systems, and enhance our capability for independent development. We also need to develop the software industry, strengthen the development of the information infrastructure, and apply digital and network technologies extensively in the technical development, production and marketing activities of enterprises, and in public services and government administration, so that industrialization and the information revolution go hand in hand.

Intensifying construction of water conservation, transportation, energy and other infrastructural facilities and attaching great importance to strategic issues concerning resources.Lack of water resources is a serious limitation on the economic and social development of our country. We need to put water conservation high on our work agenda, establish a rational system for management of water resources and a rational pricing mechanism, comprehensively adopt water conservation technologies and measures, develop water-efficient industries, and raise the entire society's awareness of water conservation. Prevention and control of water pollution should be strengthened. We should improve sewage treatment and utilization. We need to expedite the planning and building of projects to divert water from the south to the north. In transportation, we need to build highways, railways, ports, channels, airports and pipelines in order to establish a comprehensive modern transportation system that is unimpeded, safe and convenient. Energy, oil in particular, is of strategic importance. Domestic development and production of oil can no longer keep pace with the needs of the country's economic and social development, resulting in an increasing imbalance between oil supply and demand. Therefore, we need to take all possible measures to conserve and substitute for oil, accelerate exploration and exploitation of oil and natural gas resources, and make effective use of overseas resources. We need to institute a system for preserving strategic resources such as oil as soon as possible. We need to vigorously carry forward the renovation of large coal mines, construct highly productive and efficient mines, and place special emphasis on the development and utilization of clean coal technology. While making full use of existing power-generating capacity, we need to develop hydroelectric power and build large-scale thermal power plants near coal mines, reduce small thermal power stations, and moderately develop nuclear power. We should strengthen the construction and upgrading of power grids in urban and rural areas and work to complete nationwide network. We should further reform the power management system, gradually allow power plants and grids to operate separately, and institute bidding for the power supply. Emphasis should be placed on the development of all types of new energy.

Accelerating development of the service industry.This is an important avenue for stimulating economic restructuring and increasing employment. Actively developing modern services, such as information services, banking, accounting, consulting and law, will help raise the overall quality of the service industry. Up-to-date management and technology should be applied to renovate traditional service sectors, such as internal and foreign trade, transportation and municipal services, to improve their quality and efficiency. Services for urban consumers, such as real estate, community services, tourism, catering services, entertainment and fitness services need to be expanded. We need to deepen reform and adopt necessary policies and measures to create an environment favorable for the development of the service industry.

V. Implementing the Strategy for Developing the Western Region to Promote Coordinated Progress of Different Areas

Carrying out the strategy for western-region development to accelerate the development of the central and western regions is a major step taken to achieve the strategic goals of the third stage of the country's modernization drive. During the Tenth Five-Year Plan period, we need to place emphasis on key projects for a good beginning of the program. Construction of infrastructure and protection of the ecological environment should take priority, and we should strive for major breakthroughs within five to ten years. At the same time, we hope to develop science, technology, and education considerably.

We must focus on a number of major projects of strategic significance, such as the transmission of natural gas and electricity from western to eastern regions and the planned Qinghai-Tibet Railway. We need to give priority to protecting, economizing and exploiting water resources through careful planning and rational allocation in order to ensure better utilization of water. We need to steadily proceed with major projects for protecting natural forests in light of local conditions, returning cultivated land to forests or pastures, preventing and controlling desertification, and protecting grassland. Great attention should be paid to the ecological self-regeneration capacity. We should connect these projects to form an ecological green belt in the western region. We need to vigorously improve education to train professionals and workers much needed in various fields. We need to increase investment in scientific and technological development. Localities should cultivate individualized local economies by adjusting and optimizing their industrial system, and by strengthening agriculture and by accelerating the transformation of resource advantages into economic advantages. In developing the western region, we need to begin work at places along major transportation routes, such as the Eurasian Continental Bridge, the Yangtze River, and the routes in the southwestern part of the country leading to the sea. Major cities connected by such lines should serve as economic centers and play leading roles in the development of their adjacent areas. We should particularly foster the economic zones along the Tongguan-Lanzhou-Urumqi line, the upper reaches of the Yangtze River, and the Nanning-Guiyang-Kunming line to promote development of the surrounding areas.

The State Council has already promulgated a number of policies and measures to support the development of the western region. The state will invest more in the west and increase transfer payments from the national budget to local budgets there. However, people in the western region should rely primarily on their own efforts and hard work over the long haul. We need to accelerate reform and opening up and create a sound investment environment to attract more funds, technology and human resources from home and abroad to the western region. We also need to increase the exchange of cadres.

The central region should make use of its regional advantages and its comprehensive advantages of resources to accelerate its pace of economic growth. It should focus on areas with main water and land transportation lines, make full use of the role of major cities and actively foster new loci of economic growth and new economic belts. It should consolidate and develop agriculture and continue to strengthen construction of infrastructural facilities and ecological projects. It should step up efforts to upgrade traditional industries with high, new and advanced technologies and raise its technological level and competitiveness.

The eastern coastal region should be oriented towards both the domestic and international markets. Priority tasks are to accelerate scientific and technological progress and innovation, to develop industries applying high and new technology, and to develop the internationally-oriented economy to improve its general performance and its competitiveness in the international market. Areas where conditions permit should take the lead in modernization. The eastern region should strengthen its economic and technological cooperation with the central and western regions by various means to support and stimulate their economic development and to increase its own flexibility for structural adjustment and economic growth at the same time.

VI. Implementing the Strategy of Developing China Through Science and Education and Vigorously Tapping Human Resources

This is an important component of the Outline as well as an important guarantee for accomplishing the various tasks during the next five years.

Stimulating scientific and technological progress and innovation to give a strong impetus to structural readjustment and economic development.First, we need to vigorously conduct strategically significant high technology research, strive to make breakthroughs in some key technological fields that have a direct bearing on economic lifelines and national security, improve our innovative capability, and accelerate the application of high and new technology in production. Second, technological support needs to be provided for the upgrading of traditional industries. We need to concentrate on making technological progress in the processing and converting of agricultural products, manufacturing equipment, conserving water and energy, and finishing textiles. We also need to accelerate the application of high and new technology in traditional industries. Third, we need to strengthen basic research and applied basic research and improve our ability to make sustained progress in scientific and technological innovation. We need to strengthen pioneering and interdisciplinary research in key fields of the basic sciences. We have to increase basic research in selected fields where we have been doing well and which have a great bearing on development, and we have to strive to make fresh progress in the important fields of genomics, information technology, nanoscience, ecology and geoscience. We have to facilitate the integration of natural and social sciences and promote the development of management science. Emphasis should be placed on the development of philosophy and other social sciences and the advances of theoretical innovation.

We need to accelerate the reform of the structure of scientific disciplines and technological fields and promote the closer connection of science and technology with the economy. Efforts to develop a state system to stimulate innovation need to be increased, and enterprises should be encouraged to play an important role in technological progress and innovation. We need to continue to encourage research institutes engaged in technological development to merge with enterprises or be turned into enterprises, push forward the reform of non-profit research institutes, and establish a number of research institutes that can exert international influence. We need to develop agencies providing scientific and technological services. We need to improve the venture capital investment mechanism, establish a growth enterprise market, and support small and medium-sized enterprises in technological innovation. The state and the society need to invest more in science and technology. Great efforts have to be made to build national key laboratories.

Persisting in the appropriate development of future-oriented education to serve national economic and social development.In developing education, we should meet the needs of modernization, the world and the future, and concentrate on improving quality-oriented education to ensure that students improve in terms of their moral qualities, intellectual ability, physical fitness and aesthetic appreciation. We need to consolidate the achievements of making nine-year compulsory education basically universal in the country and eliminating illiteracy among young and middle-aged people, accelerate the expansion of senior secondary school education and higher education, and develop high-level programs in selected universities and disciplines. Great efforts have to be made to develop vocational education and training and to establish an educational system featuring the integration of vocational education with general education. We need to develop adult education and various forms of continuing education and gradually establish a system of lifelong education. Great emphasis should be placed on children's early education. Information technology needs to be used to develop long-distance education. In light of the needs of economic and social development, we need to continue to revise the educational structure and organization, optimize the division of disciplines, update teaching materials, reform the curriculum, examination and evaluation systems, improve the methods and quality of instruction, strengthen moral education, especially for young people, improve ideological and political work, recruit a strong corps of capable teachers, and raise the ideological and professional levels of teachers.

We need to deepen the reform of the systems for operating schools and managing education. We need to allow institutions of higher learning to make operating decisions according to law, and to continue the transformation to a system of independent operation of support services in universities and colleges. We need to encourage and help all sectors of society to run schools, and we need to exercise oversight over their operation. In light of new conditions following the reform of taxes and fees in rural areas, county governments should be responsible for overall planning of spending for elementary education. Measures must be implemented to guarantee the coordinated payment of teachers' salaries. The state and society need to invest more in education. More transfer payments and investment in special projects from the central and provincial financial departments have to be provided for education in poverty-stricken areas and areas inhabited by ethnic groups. We need to improve the systems of scholarships, grants and loans to support students, and we need to take effective measures to curb arbitrary charges levied by schools.

Making efforts to implement the strategy of tapping human resources, and focusing on the important tasks of training, attracting and utilizing talented people.In light of the overall interests of the modernization drive and long-term development, we need to train and nurture a contingent of leading cadres who are highly competent, who persist in taking the socialist road with Chinese characteristics, who have a good understanding of political theory and a pioneering spirit, who have mastered modern science and culture and acquired managerial expertise, and who are well-experienced. We need to train and cultivate a contingent of specialized, high quality public servants who are honest, industrious and eager to serve the people, and a contingent of professional personnel and enterprise managers who have advanced technological and managerial knowledge and innovative ability and meet the needs of economic and social development. We need to attach importance to training leading scholars in frontier disciplines and improving the scientific qualifications and working skills of the entire labor force. We need to deepen the reform of the personnel system; establish and improve the methods by which professionals are recruited, examined, evaluated, transferred, motivated and supervised; and formulate a mechanism that encourages talented people to emerge in large numbers and to make full use of their talent. We need to establish and improve the human resources market and protect intellectual property rights in accordance with the law. We need to attract and employ highly qualified professional personnel from abroad, and encourage students studying overseas to come back to work in China or serve their country in other appropriate ways.

VII. Further Deepening Reforms and Opening Wider to the Outside World

To gradually bring the system of socialist market economy to completion and to stimulate structural readjustment and economic growth, we will press ahead with reforms and open wider to the outside world.

Deepening the reform of state-owned enterprises to enable them to compete as equals in the market economy.The key issue in this regard is to accelerate the establishment and improvement of a modern corporate structure. We need to encourage large and medium-sized state-owned enterprises to adopt the share-holding system and to change their operating procedures by listing their shares on the stock market, setting up joint ventures with foreign investors, or holding each other's shares. The state must hold a controlling stake in strategic enterprises that concern the national economy and national security, but not necessarily in others. We need to energetically explore effective ways to manage state assets. The legal person system of governance for enterprises must be fully developed and implemented. The supervision and control of state-owned enterprises in particular need to be established and strengthened, and the role of the board of supervisors needs to be fully developed. Enterprises need to further reform their personnel, labor and income distribution systems in order to improve the mechanisms that provide incentives and restraints and to strengthen scientific management. In the course of readjusting the industrial structure, we must adhere to the principles of "advancing in some aspects while retreating in others" and "focusing on certain tasks while putting others aside" and promote strategic readjustment of the overall arrangement of the state-owned sector of the economy. We need to continue to relax control over small and medium-sized state-owned enterprises to enhance their vitality. More efforts need to be made to separate the functions of government from those of enterprises, and the functions of government need to be transformed to reduce administrative oversight and approval. Chambers of commerce, trade associations and other such intermediary agencies are encouraged to play appropriate roles. We need to further reform the management systems of industries such as electricity, railways, civil aviation and telecommunications, and introduce a mechanism for competition. The reforms need to improve the relations between the government and enterprises so as to meet the requirements of a socialist market economy. The ownership system needs to be further improved. We need to uphold the dominance of the public sector of the economy, let the state-owned sector play the leading role, develop various forms of collective undertakings, and support, encourage and guide the healthy development of private and individual sectors of the economy.

Overhauling and regulating market order, and expanding the market system.This is an urgent task to ensure normal operation of the economy and an important measure to strengthen the socialist market economy. We must improve laws and regulations concerning markets and enforce the law strictly. We need to improve oversight mechanisms and employ advanced technology to improve market supervision. We must persist in cracking down on criminal activities such as producing and marketing fake and shoddy goods, tax evasion, tax fraud, obtaining foreign currency through deception, and smuggling. We need to overhaul the construction market, reorganize and standardize the financial order, strengthen financial discipline, tighten audit supervision, standardize the operation of intermediary agencies, break up monopolies by departments or industries, eliminate regional barriers, and improve management and supervision of industrial safety. We need to oppose local protectionism. We need to establish as soon as possible and improve an integrated national market system that is standardized and encourages fair competition. We need to focus our efforts on the development of markets for production factors, especially capital, foster work ethics that stress honesty and trustworthiness, and accelerate the establishment and improvement of a nationwide credit system.

Enhancing macro-control, and deepening reform of the finance, taxation, banking and investment systems.We need to gear our macroeconomic policies to the changing economic situation. In the near future we will continue to implement a proactive fiscal policy to increase investment and stimulate consumption. We need to conduct financial affairs according to the law, strengthen tax collection and management, and improve supervision of government financial affairs. We will step up the reform of replacing fees with taxes and the reform of the budget system, improve the tax system, and adjust and improve the system of fiscal expenditures in order to gradually set up a public finance framework compatible with a socialist market economy. While expanding domestic demand and checking the trend of deflation, we need to be on guard against possible overheated economic growth and inflation. We will continue to implement a prudent monetary policy and regulate money supply in timely fashion to keep the Renminbi stable. We need to carry out a comprehensive reform of the wholly state-owned commercial banks in the light of modern banking principles and bring the role of the policy banks into full play. We need to develop medium-sized and small banking institutions, standardize and improve the securities market, and safeguard the interests of investors. We need to expand the insurance industry, improve supervision of financial institutions, implement a system of strict evaluation of financial operations and management, implement a system of accountability, improve financial services and the quality of financial assets, and guard against and defuse financial risks. We also need to deepen the reform of the investment system, adopt a system under which legal persons are responsible for all investment projects, a public bidding system, a project supervision system, and a contract management system, and strengthen the mechanisms for restraining investment.

Doing a better job in opening to the outside world in the light of economic globalization.First, we should lose no time in preparing for China's entry into the World Trade Organization and fulfilling our tasks in the transitional period. We need to take effective measures to change the methods of government administration and enhance the competitiveness of Chinese enterprises. We need to deepen the reforms in order to establish a system of foreign trade and economic cooperation compatible with international norms and suitable to domestic conditions. We need to step up the work of revising relevant laws and regulations. We also need to train professionals who are well acquainted with regulations governing international trade. Second, we need to expand import and export trade, with emphasis on the export of high-quality goods and technology. We need to optimize the mix of export commodities by expanding the share of high and new technology products, raising the technological content and added value in traditional commodities exported in large quantities, and expanding the scale of the service sector. We need to standardize the regulation of processing industries and increase the value-added increment of such trade. We need to vigorously promote market diversification and open new markets for our exports. In import trade we need to emphasize advanced technology, key equipment and important raw and processed materials that are urgently needed in China. We need to take an active part in multilateral trading partnerships and international and regional economic cooperation. Third, we need to make better use of foreign funds. We need to open up the service sector to foreign investment step by step. We need to encourage foreign investors, especially transnational corporations, to invest in high-tech industries and infrastructure, and encourage them to set up research and development centers in China and to participate in the restructuring and renovation of state-owned enterprises. We need to support eligible enterprises to become listed on overseas stock markets and further improve the investment climate. We also need to explore new ways to utilize more foreign investment, such as acquisition, merger, risk investment, investment funds, and investment in securities. We should actively encourage foreign businessmen to invest more in the central and western regions. We should continue to manage the special economic zones and the Pudong New Area well. Fourth, we need to implement a "going outside" strategy, encouraging enterprises with comparative advantages to make investments abroad, to establish processing operations, to exploit foreign resources with local partners, to contract for international engineering projects, and to increase the export of labor. We need to provide a supportive policy framework to create favorable conditions for enterprises to establish overseas operations. We also need to strengthen supervision and prevent the loss of state assets.

VIII. Constantly Raising Living Standards and Improving the Social Security System

It is an important task for the government in the next five years to raise living standards substantially and gradually enable the people to lead a more comfortable life.

Improving the social security system at a faster pace.This is a major issue concerning reform, development and stability. We need to ensure that basic living allowances for laid-off workers from state-owned enterprises and basic pensions for retirees are paid in full and on time. At the same time, we need to accelerate the formation of a social security system that is independent of enterprises or institutions and supported by funds from diversified sources, and that provides standardized safeguards and society-wide services. In addition, we need to conduct meticulous pilot projects aimed at improving the social security system in urban areas. We need to improve the basic old-age insurance system for workers in urban areas, combining contributions from enterprises and institutions with personal accounts. We also need to improve the unemployment insurance system and gradually incorporate the basic cost-of-living allowances for workers laid off by state-owned enterprises into unemployment insurance. We need to strengthen the system of subsistence allowances for urban residents and take good care of those in dire need. We need to improve the basic medical insurance system for workers in urban areas and carry forward the reform of medical institution and the system for distributing medicines. Institutional employers with available resources are encouraged to set up supplementary old-age and medical insurance programs for their employees and more fully utilize commercial insurance. We must see to it that there are reliable sources and a stable flow of funds for social security, and that these funds are efficiently operated under a strict management mechanism. We need to develop other social security programs, such as social welfare, charities, job placement for demobilized servicemen and social mutual aid. We must safeguard the legitimate rights and interests of women, juveniles, senior citizens and the handicapped; and we need to support the various programs to help the handicapped.

Expanding employment by all possible means.During the Tenth Five-Year Plan period, we face the demanding task of expanding employment. While maintaining a fairly high growth rate for the economy, we must develop labor-intensive industries that have comparative advantages, especially service businesses that can provide large numbers of jobs. We also need to encourage the development of collective, private and individual businesses to create more jobs. We need to improve the infrastructure of communities and expand community services. We need to set up a flexible employment system to provide more forms of employment. We need to help people change their ideas about employment and encourage them to start their own businesses or find jobs for themselves. We need to make greater efforts to develop the labor market, improve employment services, expand vocational training, and form market-oriented employment mechanisms.

Increasing income of urban dwellers, especially those with low incomes.We need to establish a wage payment system, a minimum wage system, and a mechanism for adjusting the minimum wage as the economy grows. Government financial departments at all levels need to ensure that the salaries of government employees and pensions for retirees are paid in full and on time, and gradually increase salaries in accordance with the principle of feeding the people first, then building the country. We need to deepen the reform of the system of income distribution. We should adhere to the principle of giving priority to efficiency with due consideration to fairness. We need to implement an income distribution system in which distribution according to work is the leading principle and other factors are taken into consideration, and we need to include capital, technology and other economic factors in the distribution of economic rewards. We must raise salaries of senior managers and senior technical professionals in state-owned enterprises to fully reflect their contributions and annual salaries may be introduced on a trial basis for them. At the same time we must enforce strict restraint and supervision to prevent those who do poor work from getting high salaries even if the performance of their enterprises is dissatisfactory. There must be penalties for those who are not qualified or even guilty of malfeasance. Stock options may also be initiated on a trial basis for leading executives and key technical professionals in state-controlled companies listed on the stock market, but state assets must not be transferred to individuals. We need to tighten the control and supervision over income distribution in monopoly industries, standardize the distribution of social wealth, and strengthen the regulatory function of tax collection over income distribution to prevent the gap in income distribution from becoming too wide.

Adjusting the consumption pattern and improving the environment for consumption.Efforts should be made to improve housing and transportation conditions for both urban and rural residents. We need to build more affordable and functional housing and establish a system to ensure an adequate supply of low rent housing. We need to energetically develop public transportation. We need to improve urban landscaping and develop infrastructures in urban and rural areas. More efforts should be made to improve the living environment of urban and rural residents. We need to develop preventive medical care for communities, improve public health services in rural areas, and expand public-oriented sports facilities.

IX. Continuing to Implement the Strategy of Sustainable Development

We need to better coordinate the development of population, resources and the environment, and place more emphasis on the implementation of the strategy of sustainable development.

Adhering to the basic state policy on family planning.We must work hard to sustain the low birth rate and improve prenatal and postnatal care. We need to devote more effort to the management of family planning in rural areas and among the floating population. We should establish awards for family planning and continue to hold leaders of local Party and government organizations responsible for work in this regard. Legislation on population and family planning must be accelerated. We need to expand care for senior citizens.

Protecting natural resources and using them properly.We need to protect and make proper use of valuable resources such as fresh water, farmland and energy in accordance with the law. We must gradually establish a system of reserves for strategically important mineral resources and ensure their safe supply. We need to strengthen the comprehensive development, utilization and conservation of marine resources. We need to increase our recycling of resources in order to utilize our resources more effectively. We need to improve the system of paying compensation for the use of natural resources. We must safeguard the rights and interests of the state as the owner of mineral and other resources. We must improve laws and regulations in this regard, and strengthen law enforcement.

Improving ecological conservation and strengthening environmental protection.Greater efforts need to be exerted to complete projects to protect natural forests, such as those along the upper reaches of the Yangtze River and the upper and middle reaches of the Yellow River. We need to intensify work on the Northeast, North and Northwest China Shelter Forest Projects and similar projects on the middle and lower reaches of the Yangtze. We need to do more to protect natural grasslands. We need to step up our efforts to prevent the karst from becoming stony desert. No time can be lost in bringing under control the sources of sand storms affecting the area around Beijing and Tianjin. We need to continue our efforts to control and treat water pollution in important river valleys, regions and sea areas. We need to treat pollution and do more landscaping in large and medium cities with the aim of noticeably improving the quality of the environment there. We also need to pay due attention to prevention and control of environmental pollution in rural areas. We need to improve environmental, meteorological and seismological monitoring to help prevention and reduction of natural disasters.

Vigorously promoting socialist spiritual civilization.We need to follow the principle of "doing two jobs at once and attaching equal importance to each." We need to consolidate and strengthen the guiding role of Marxism and educate the people in Marxism-Leninism, Mao Zedong Thought and Deng Xiaoping Theory. We need to promote patriotism, collectivism and socialism. We need to continue education of our cadres in the important principle of "Three Represents" (The Communist Party of China represents the requirement to develop advanced productive forces, an orientation towards advanced culture, and the fundamental interests of the overwhelming majority of the people in China.) and foster the spirit of studying hard, being politically-minded, and being honest and upright. Our cadres should have a correct outlook on the world and life and have correct values. We need to work hard to foster ideas and ethics appropriate for a socialist market economy. We need to administer the country in accordance with moral principles as well as the law. We need to disseminate scientific knowledge, combat ignorance and superstition, and encourage healthy lifestyles. We need to further develop various cultural undertakings, such as literature and art, journalism and publishing, and radio, film and television. We should adhere to the principles of serving the people and socialism and of "letting a hundred flowers blossom and a hundred schools of thought contend." We need to produce more and better cultural and intellectual works. We need to maintain the correct orientation of public opinion, and place strong emphasis on the establishment and management of new information media. We need to build more libraries, cultural centers, science and technology centers, museums, archives, and recreation centers for juveniles and senior citizens. Mass participation activities should be continued to promote cultural and ethical progress. We need to deepen reform of the system for managing cultural undertakings, improve the economic policies concerning cultural undertakings, and promote the development of industries related to culture. We need to organize and standardize the cultural market and persist in the fight against pornographic and other illegal products.

Energetically improving socialist democracy and the legal system.We need to develop a socialist democratic political system, govern the country according to the law, and make China a socialist country ruled by law. We need to press ahead with reform of the political system; implement democratic elections, decision-making, management and supervision; protect the extensive rights and freedoms of the people as prescribed by law; and respect and guarantee human rights. We need to continue to strengthen the legislative and supervisory role of the People's Congress, and expand the role of the Chinese People's Political Consultative Conference in political consultation, democratic supervision, and administration and deliberation of state affairs. We need to bring the legal system into line with a socialist market economy. Governments at all levels must conscientiously subject themselves to the supervision of the people's congresses at corresponding levels and consult with the CPPCC. They must govern in accordance with the law and be strict in performing official duties. We need to deepen the reform of the judicial system, strictly enforce laws, and administer justice impartially. We need to put greater efforts into combating corruption and building a clean government. We need to strengthen legal education and raise the awareness of law among all citizens. We need to strengthen development of legal infrastructures, and improve the qualifications of procuratorial, judicial and public security officers.

We need to make further efforts to implement the Party's policy on ethnic groups, adhere to and build upon the system of the autonomy of ethnic minority regions, and develop socialist relationships among all ethnic groups characterized by equality, unity and mutual assistance. As part of our efforts to develop the western region of China, we need to give more support to accelerate the all-round economic and social development of the areas inhabited by ethnic minorities, and strive for common prosperity and progress of all ethnic groups. We need to implement the Party's policy on religions in a comprehensive manner, protect the people's freedom of religious belief, administer religious affairs in accordance with the law, and help the various religions adapt to socialist society. We need to conscientiously implement the Party's policy on affairs concerning overseas Chinese and bring their role into full play in the modernization drive and the great cause of peaceful reunification of the country.

We need to better safeguard social stability and correctly handle conflicts among the people in the new era. We should pay close attention to correspondence from the people and their personal visits. We need to improve public order through comprehensive measures and crack down on criminal activities that pose a threat to social order and national security. We must use legal means to combat ethnic separatist activities, religious extremist forces, violent and terrorist activities, cults, and illegal activities carried out under the guise of religion. We need to continue our campaign against the Falungong cult, and further expose and condemn the anti-human, anti-social and anti-science nature of the cult, which has become a tool for domestic and overseas forces hostile to our socialist government. We need to mete out severe punishment to the small number of criminals while making unremitting efforts to unite, educate and rescue the vast majority of people who have been taken in.

Strengthening national defense and building up the armed services.This is an important guarantee for the security of the state and the success of the modernization drive. As we focus our efforts on developing the national economy, we must also strengthen our national defense and increase our defense capabilities. We need to strengthen ideological and political work among servicemen, ensure the absolute leadership of the Party over the armed forces, and guide the development of the armed forces in the correct direction. We need to work conscientiously to implement the military strategy of active defense in the new era; persist in reform and innovation; strengthen the armed forces through science and technology, with an emphasis on quality and thrift; run the armed forces by law; and streamline the armed forces in a Chinese way in order to build a more modernized, standardized revolutionary army. We need to raise the people's awareness of the importance of national defense and improve the mobilization system. We need to strengthen defense-related scientific research, reform and restructure science, technology and industry related to national defense, develop new weapons and equipment, utilize modern technology, especially high technology to improve the defense capabilities and combat effectiveness of the armed forces, and ensure their preparedness for any contingency.

Fellow Deputies,

As we enter the new century, we will continue to adhere to the principle of "one country, two systems" and the basic laws of Hong Kong and Macao special administrative regions. Economic cooperation and exchanges of the mainland with Hong Kong and Macao should be strengthened. We will render full support to the chief executives and governments of Hong Kong and Macao in their efforts to govern the regions in accordance with the law, and defend the long-term prosperity and stability of Hong Kong and Macao.

An early settlement of the Taiwan issue and the accomplishment of national reunification are the shared aspirations of the entire Chinese nation and an enormous task we are now facing. We will continue to follow the basic principles of "peaceful reunification" and "one country, two systems" and the eight-point proposal put forward by President Jiang Zemin. We will, together with the vast majority of our compatriots in Taiwan, resolutely put a stop to any separatist attempt and do our utmost to achieve peaceful reunification. We will adhere to the one China principle, continue to push for cross-Straits dialogue and negotiations on that basis, and promote economic, cultural and personnel exchanges between the two sides. We are confident that with the unremitting efforts of all Chinese people, the great cause of national reunification will surely be accomplished at an early date.

In the face of an international situation characterized by growing political multipolarization and economic globalization, we will, as always, pursue an independent foreign policy of peace, develop friendly relations and cooperation with all countries on the basis of the Five Principles of Peaceful Coexistence, and strive for a long-term peaceful international environment and good relations with our neighbors. China will take an active part in international affairs and make fresh contributions to the maintenance of world peace, the promotion of international cooperation, the achievement of common development, and the establishment of a peaceful, stable, just and reasonable new international political and economic order.

Fellow Deputies,

The year 2001 is the first year into the new century and the first year for the implementation of the Tenth Five-Year Plan.To ensure a good beginning for this endeavor, it is crucial to act in the spirit of the Fifth Plenary Session of the Party's Fifteenth Central Committee and its conference on economic work, and do all aspects of this year's work well. We need to adhere to the policy of expanding domestic demand and continue to follow a proactive fiscal policy and a prudent monetary policy. We will issue 150 billion yuan of long-term treasury bonds, and invest the ensuing revenue in projects under construction and development projects in the western region. We will raise staff salaries of government organizations and institutions at an appropriate rate. We will also increase the earnings of urban residents with low incomes. We need to put strengthening agriculture as the foundation of the economy and increasing farmers' incomes on the top of our economic agenda, and take effective measures to solve outstanding agricultural and other problems presently facing rural areas. We need to consolidate and build on our achievements in the reform of state-owned enterprises, and pay special attention to establishing a modern corporate structure, transforming operational mechanisms and intensifying scientific management. We need to quicken preparation for accession into the World Trade Organization. We need to improve the social security system, create more jobs by various means, and raise people's living standards. An important and pressing task is to make great efforts in reorganizing and standardizing the order of the market economy. We need to promote spiritual civilization and improve democracy and the legal system. We need to continue to handle the relationship between reform, development and stability properly, improve all facets of public security and maintain social stability. We fully support Beijing's bid to host the Olympic Games. We need to make overall plans by taking all factors into consideration and avail ourselves of the favorable circumstances in order to sustain our forward momentum in economic and social development.

Fellow Deputies,

We have already entered the 21st century and started to march toward the strategic objectives of the third stage in the modernization drive. No difficulties or hardships can deter we Chinese people in our pursuit of success. Let us rally closely around the Party Central Committee with Comrade Jiang Zemin at its core, hold high the great banner of Deng Xiaoping Theory, adhere to the Party's basic line, and follow the guidance of the important principle of the "Three Represents". Let us bestir ourselves and work diligently toward the objectives set forth in the Tenth Five-Year Plan for the establishment of a strong, prosperous, democratic, and culturally advanced modern socialist country!